Are the Tax Cuts Paying for Themselves?

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The Heritage Foundation’s Stephen Moore, a longtime supply-sider who advised President Trump during the 2016 campaign, argues in Wednesday’s Wall Street Journal that “the corporate tax cut is paying for itself,” largely through faster growth that’s expanding the economy.

While this line of analysis has come up many times lately among tax cut enthusiasts, repetition is not improving its viability. Moore’s claim inspired this short but very much to-the-point response from Marc Goldwein, policy director at the Committee for a Responsible Federal Budget: “There is NO evidence to suggest this is true.”

Goldwein points out that while the economy is indeed growing faster than before the tax cuts took effect, the added growth is not being driven entirely by reductions in the corporate tax rate. Citing CBO figures, Goldwein says that the tax bill is producing about $400 billion worth of extra growth, with about half of that, $200 billion, coming from the corporate side. But the corporate cuts cost about $600 billion – meaning that the corporate tax cuts are paying about a third of their cost.

“That's actually not bad!,” said Goldwein. “But it's not close to fully paying for itself either.”

For more on the lost revenue produced by the tax cuts, be sure to see Justin Fox’s analysis, “Yes, the Tax Cuts Have Cost the U.S. Treasury Money,” at Bloomberg earlier this week.